World Bank: Fight Poverty With Political Reform

Global economic meetings in Washington, D.C., this week take place as protesters, like these in Sanaa, Yemen, demonstrate for the overthrow of governments and measures to address poverty.

Muhammed Muheisen
/ AP

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Originally published on April 11, 2011 3:00 pm

The global economy has largely recovered from the crisis of 2008, but when finance ministers from around the world gather in Washington this week, they will still face sobering challenges. World trade talks are on the verge of collapse, and the uprisings in the Arab world show that unemployment and corruption can shake up governments that otherwise seem stable.

The spring meetings of the World Bank and the International Monetary Fund are traditionally an occasion to trumpet international cooperation. In recent years, however, the gatherings have highlighted tensions between the advanced countries and those whose economies are still developing. The emerging market economies are booming, in part at the expense of the developed countries.

This year's meetings, to be held April 15-17 in Washington, take place against a backdrop of nearly 10 years of negotiations over a new global trade pact. The "Doha" round of talks, named for Doha, Qatar, where the negotiations were launched in 2001, are aimed at the agreement on a new set of rules to govern world trade, but disputes between the developed and developing economies have so far blocked an accord.

Pascal Lamy, director general of the World Trade Organization, told reporters in Geneva last week that the Doha stalemate reminds him of a stubborn mule.

"The difficulty with a mule is that they sometimes get stuck," Lamy said. "They don't go backwards, but they refuse to move forward, either."

Governments generally agree that more global trade would be good for the world economy and that barriers to trade therefore need to come down. But they don't agree on whose barriers should come down first. In a recent interview with NPR, Lamy said as the developing countries become more powerful, they're more determined to assert their own trade interests vis-a-vis the U.S., the European Union and other advanced countries.

"Twenty years ago, a deal was about the EU, U.S., Japan, Canada agreeing on something, and most of the rest of the membership would go along," Lamy said. "We are now in a world where China, India, Brazil, South Africa and Indonesia are playing their own game."

Rich countries like the United States say the developing countries, like China, need to open their economies to more international competition, by reducing tariffs or import quotas, for example. But Jagdish Bhagwati, a Columbia University professor who has advised the World Trade Organization, argues that trade negotiators at some point need to give up trying to determine who has made the most concessions and just make a deal.

"There are so many issues at stake — intellectual property protection, anti-dumping rules, concessions on tariffs, concessions on nontariff barriers — that to say, 'We are doing things and they don't balance what you are doing,' that's becoming rather stupid in my opinion," Bhagwati says. "Those issues can't be quantified."

Advocates of a Doha trade deal hope the World Bank-IMF meetings in Washington will spur some progress.

Political events in the Arab world will also get attention at the meetings. Government ministers have realized that the popular uprisings have come in countries whose economies are stagnating. The lesson is that economic conditions and political sentiments are closely linked. A lack of opportunity will fuel unrest; conversely, whether countries grow economically may depend not just on what economic policies they adopt, but on how they treat their populations.

World Bank President Robert Zoellick drove that point home in a speech last week at the Peterson Institute of International Economics in Washington.

"Our message to our clients, whatever their political system, is that you cannot have successful development without good governance and without the participation of your citizens," Zoellick said.

In Tunisia, Egypt, Morocco and other Arab countries, people have shown how angry they are about government corruption and blocked opportunity. Zoellick said governments everywhere need to heed the developments in the Arab world.

"I'm trying to say that what happens with Middle East and North Africa, this needs to be factored into where we go from here," Zoellick said.

That lesson is underscored in a newly released World Bank development report. The main conclusion: Political conflict in a country is a huge barrier to economic development; and to attack poverty, governments need to reform politically.

That message might be undercut at the World Bank and IMF meetings, however, by one rather awkward fact: The chairman of the meeting's "Development Committee" this week is the finance minister of Bahrain, a country where a popular uprising has just been forcefully repressed.

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NPR's Tom Gjelten has more.

TOM GJELTEN: Pascal Lamy, the director of the World Trade Organization, told reporters in Geneva last week that the current trade picture reminds him of a stubborn mule.

PASCAL LAMY: The difficulty with a mule is that they sometimes get stuck. They don't go backwards, but they refuse to move forward, either.

GJELTEN: Governments agree that more global trade would be good for the world economy, and that barriers to trade therefore need to come down. But they don't agree on whose barriers come down first, and these talks have gone on now for nearly 10 years.

NPR: As the developing countries become more powerful, they are more determined to assert their own trade interests - vis-a-vis the U.S., the European Union, and other advanced countries.

LAMY: Twenty years ago, a deal was about the EU, U.S., Japan, Canada agreeing on something, and, you know, most of the rest of the membership would go along with that. We are now in a world where China, India, Brazil, South Africa, Indonesia are playing their own game. And, you know, this complexity is not just simply add and multiply.

GJELTEN: But Jagdish Bhagwati, a Columbia University professor who has advised the World Trade Organization, argues that at a certain point trade negotiators should give up trying to see who has made the most concessions and just make a deal.

JAGDISH BHAGWATI: There are so many issues at stake: intellectual property protection, anti-dumping rules, concessions on tariffs, concessions on non-tariff barriers. To say that we are doing a certain number of things and they don't balance what you are doing, I mean, that's becoming rather stupid, in my opinion.

GJELTEN: In a speech here last week, World Bank President Robert Zoellick argued that whether countries grow depends not just on what economic policies they adopt, but on how they treat their populations.

ROBERT ZOELLICK: Our message to our clients, whatever their political system, is that you cannot have successful development without good governance and without the participation of your citizens.

GJELTEN: In Tunisia and Egypt, in Morocco and in other Arab countries, people have shown how angry they are about government corruption and blocked opportunity. Zoellick said governments everywhere need to heed developments in the Arab world. Countries stagnate when their populations are alienated. They prosper when their societies are energized.

ZOELLICK: I'm trying to say that what happens with Middle East and North Africa, this needs to be factored into where we go from here.

GJELTEN: That lesson is underscored in a World Bank development report released today. This main conclusion: political conflict in a country is a huge barrier to economic development. To attack poverty, governments need to reform politically.